Know the true costs of delivering your online backup service

Know the true costs of delivering your online backup service

We’ve run a profitable and growing pure play online backup service serving the SMB market for more then 10 years now (with our Divinsa brand) and we’ve learned that the average small business client selects around 11GB of uncompressed data, which with efficient compression, differentials, de-duplication, and retention results in just under 4GB of storage using our WholesaleBackup for Windows solution, though your numbers will vary depending on which specific applications, such as Microsoft Exchange or SQL databases, are being backed up.

We are happy to share the physical cost estimates with you so that you can plan and price your service appropriately. Please remember to add in your own overhead and personnel costs as we can’t estimate these for you because they depend on (a) the level and type of service you choose to offer, (b) your own personnel costs, (c) how your clients pay you, etc.

For your convenience we’re providing you with the physical costs of both hosting your online backup service in the Cloud, such as with Amazon EC2, as well as with your own hardware at your office (colocation costs in a data center will be pretty much in-between these two costs), so you can choose the path you wish to go; we’ll also explore some of the differences of both so you have an idea of what choosing one over the other implies for you.

Hosting the Backups Yourself

If you have sufficient bandwidth at your office (assume each simultaneous client’s upload will be an average 1.2Mb/s, and that 15% of your clients will be backing up concurrently) your costs for hardware and bandwidth will likely be 1/2 to 1/3rd of Amazon’s costs (i.e. $0.075/GB tp $0.05/GB). But, an important thing to budget for, if you are purchasing your own hardware, is fast disk I/O with controllers and high RPM disks that support multiple readers/writers (for example SAS disks are much better at data concurrency than SATA disks and don’t even think about using PATA/ATA or external USB drives) otherwise your disk system will quickly be a bottleneck and thus your hardware will not scale to hundreds of backup clients.

In factoring in your own personnel costs and overhead in the DIY scenario, you may find that, depending on the service you are offering and the size you expect to grow to, the additional cost of the Cloud maybe cheaper than hosting it yourself and so it’s benefits may in fact outweigh the additional perceived costs… Similarly, if you don’t think you will grow very fast, or wish to postpone upfront costs until you’ve acquired enough customers to justify upfront hardware and Internet provisioning costs, you may wish to consider just rebranding WholesaleBackup’s online service as your own and then migrate your customers to your own online backup service, whether in the Cloud or on your own hardware, when the math works in your favor (please note that WholesaleBackup is the only provider we know of which provides you with this option).

So you can have a fully provisioned cloud server, from a leading provider, with uniterruptable power, burstable bandwidth, and 1 TB of storage for around $100/month ($0.10/GB) where each additional TB of storage will cost closer to $0.06/GB (so your overall cost/GB will decline as you add more storage to an existing cloud server). As you can imagine, Amazon.com is making a nice profit on this!

Although cost is a big reason not to use the Cloud, some benefits of the Cloud over DIY you may wish to consider are (1) instant scalability enabling you to add new servers and storage in an instant and have appropriate uncapped Internet bandwidth always available, (2) your costs scale more linearly as you grow bigger, and (3) it’s someone else’s job and cost to

[a] source, finance, and purchase new hardware, [b] maintain, repair and replace aging and faulty hardware, and [c] swap disks when they fail in the middle of the night – note problems seem to always occur in the middle of the night which is the period of highest stress on online backup services.